Articles Posted in FLSA

Among the most active and quickly evolving areas in wage-and-hour law is liability associated with the misappropriation of tips. Under federal law, employers are permitted to pay workers in tip occupations an hourly wage, minus the prevailing minimum wage, for it is assumed that the lower hourly wage will be offset by the tips earned by the employee.  Given that tips make up a substantial portion of these employees’ wages, many will take issue with tips being co-opted by employers for other purposes. For instance, in a recent decision, Malivuk v. Ameripark, LLC, an Atlanta federal district court resolved a motion to dismiss in an action brought by a group of valets, arguing that their employers committed minimum wage violations by using money gathered from tips to offset other business expenses.

This action was brought against Ameripark, LLC, a limited liability corporation that provides valet services to businesses throughout the Atlanta metro area. A valet employed by Ameripark alleged that although she and other similarly situated employees were provided an hourly wage, they were unlawfully denied wages under both federal and state laws because Ameripark pooled the tips received by valets from customers and appropriated some of the tip funds for business purposes other than compensating the valets. The plaintiff brought suit against Ameripark. Following the initiation of the action, Ameripark moved to dismiss the complaint on the grounds that the plaintiff did not state a valid wage claim under federal law and that the state law claims also failed because they were dependent on the plaintiff stating a valid federal wage claim.

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Under the Fair Labor Standards Act of 1938 (“FLSA”), virtually every business operating in America is required to furnish its employees the federal minimum wage and overtime compensation. There are a number of exceptions to the FLSA, however, and many employers will try to cubbyhole their employees into one of the many available exemptions. Among the exceptions most often cited by employers is the one that applies to “independent contractors.” Indeed, many employers will classify their employees as independent contractors and, in some cases, have them sign form agreements purportedly manifesting an intent to be bound by the terms of an independent contractor relationship. This dynamic was recently addressed by an Atlanta federal district court in Henderson v. 1400 Northside Drive, Inc., a case with facts involving whether strippers were the employees of a strip club.

Henderson was brought by a group of male adult dancers who worked at an adult nightclub that was owned and operated by 1400 Northside Drive, Inc. Each dancer was required to sign an “Independent Contractor Agreement,” which generally stated that the dancer understood that his compensation would be derived solely from customer gratuities and that the club was not responsible for compensating the dancer in any way. The dancers argued that they were misclassified as independent contractors and are therefore entitled to unpaid minimum wage and overtime compensation from the club.

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Although most recent conversations regarding the Fair Labor and Standards Act (“FLSA”), legislation establishing a minimum wage and other compensation rules for most U.S. employees, has focused on the Supreme Court’s recent ruling in Integrity Staffing Solutions, Inc. v. Busk, lower federal courts on a daily basis address many questions regarding the provisions of this important law. Among the most common disputes that arise in FLSA litigation are those regarding the applicability of the numerous exemptions from overtime wage provisions. This everyday FLSA battle is illustrated in Bailey v. Innovative Contracting Solutions, Inc., a recent decision from the Atlanta Division of the United States District Court for the Northern District of Georgia.

The plaintiff is this case was hired by the principal defendant, Innovative Contracting Solutions, Inc. (“Innovative”), in July 2011. The plaintiff worked as a project superintendent for Innovative, which is a commercial general contractor that renovates offices, medical facilities, industrial buildings, and restaurants throughout the region. For his work, the plaintiff was paid an annual salary of $49,000. Beyond these fundamental facts, many issues remained in dispute. Specifically, the parties disputed facts involving the scope and apportionment of the plaintiff’s responsibilities as project superintendent, the plaintiff’s supervisory authority and control over lower-level Innovative employees and subcontractors, and finally the proper hierarchy of power at Innovative, particularly in relation to project superintendents and project managers. Innovative never paid the defendant time and half for any overtime hours worked in excess of 40 hours per workweek. The plaintiff therefore brought a suit against Innovative for these unpaid overtime wages. The defendant moved for summary judgment, which the district court ultimately denied with respect to the most important issues.

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